How Bitcoin Works
By now, you know that in approximately every 10 minutes, new batches of cryptocurrency coins are made, with an individual coin worth $8000+ at current value.
Before I proceed with explaining how it works, let me first make you understand how it does not work. Firstly, do not get the wrong idea that cryptocurrency mining involves using equipment to search through the depths of the internet to locate a digital ore that can be mined into Bitcoins. There is no actual ore, and Bitcoins are not about smelting or extracting that ore from the virtual world.
It has been called mining because the individuals who get new Bitcoins earn it in small and finite quantities periodically, similar to gold. Thus, the process has been termed as mining, and you are already aware of the halving system of the Bitcoin batch in an interval of every four years.
Now, to learn how it works, you should know that all Bitcoin miners are doing is comprehensive bookkeeping. A huge public ledger contains all the records of the transactions carried out in the world of cryptocurrency until the present. Any transaction of Bitcoins between two parties has to be recorded and accredited by the miners in the virtual ledger.
It is the miner’s responsibility to monitor that the sender is transacting actual money for mining the Bitcoin. Once the transfer of money is approved, the miners validate it in the ledger. Moreover, to make sure that potential attackers do not hack the ledger, the ledger is encrypted with very complex computations that are almost impossible to hack. This service of mining offers them Bitcoins.
There is always a competition going on amongst miners, who look forward to approving their batch of transactions to complete the computations needed to encrypt the transactions in the public ledger. Every new batch results in a rewarding activity for the miners who completed the transaction.
However, the computation process is quite daunting. Specialized equipment with hi-tech processing units are responsible for computing and solving cryptographic problems.
It all does seem exhilarating, doesn’t it? After all, the process of mining has generated a robust solution to a tough problem that every digital currency faces, which is double spending.